Tuesday, 02 January 2024 12:17 GMT

US Dollar Slips Amid Ukraine Peace Hopes And Trade Uncertainty


(MENAFN- Investor Ideas) Investorideas, rated as a top 100 investment website for investing ideas, issues market commentary from Joseph Dahrieh, Managing Principal at Tickmill.


The US Dollar started the month on a weaker note as renewed optimism for a resolution to the Ukraine-Russia conflict led investors to adopt a risk-on stance. Following a contentious meeting with US President Donald Trump last week, Ukrainian Prime Minister Volodymyr Zelensky met with European leaders in London over the weekend to draft a peace proposal to present to Washington. This development could reduce demand for safe-haven assets, placing downward pressure on the greenback.

At the same time, trade developments add to the dollar's woes. Over the weekend, US Commerce Secretary Howard Lutnick suggested that tariffs against Mexico and Canada remain "fluid," hinting at possible reductions from the proposed 25%. However, uncertainty lingers as a 10% tariff on Chinese goods is set to take effect tomorrow, which could provide temporary relief to the currency.

Meanwhile, US treasury yields stabilized, with the 10-year note hovering at 4.2% as market participants eagerly await this week's key economic releases, including ISM PMIs and Nonfarm Payrolls. Robust data should bolster the Fed's hawkish tone and provide support to yields, while weaker data may fuel dovish expectations, adding further downside pressure.

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